LONDON — Oil prices rose on Wednesday on threats that Russia will walk away from its energy supply contracts, reversing losses from earlier in the session when prices fell to their lowest since Russia invaded Ukraine.
Brent crude futures were up 85 cents, or 0.92%, at $93.68 a barrel by 0931 GMT, having earlier hit their lowest since Feb. 18 at $91.20.
US West Texas Intermediate crude futures gained 80 cents, or 0.92%, to $87.68. The benchmark had earlier fallen to a session low of $85.08, the weakest since Jan. 26.
Oil rebounded after President Vladimir Putin said on Wednesday that Russia will stop supplying gas and oil if price caps are imposed on Russia’s energy resources.
Analysts already expect oil supply to be tight for the last quarter of the year.
“The halt of release from the US SPR (strategic petroleum reserve) coupled with the implementation of an EU embargo on Russian crude has the makings of a global supply crunch this winter,” said PVM analyst Stephen Brennock.
Adding further support were expectations of tighter oil inventories in the United States.
US crude stockpiles are expected to have fallen for a fourth consecutive week, declining by an estimated 733,000 barrels in the week to Sept. 2, a preliminary Reuters poll showed on Tuesday.
Weekly US inventory reports from the American Petroleum Institute and Energy Information Administration will be released on Wednesday and Thursday respectively, a day later than usual, because of a public holiday on Monday. In spite of looming supply shortages, the Organization of the Petroleum Exporting Countries (OPEC) and their allies, a group known as OPEC+, decided to cut output by 100,000 barrels per day in October.
The prospect of a global economic recession has heightened demand fears. Credit rating agency Fitch said on Tuesday the halt of the Nord Stream 1 pipeline has increased the likelihood of a recession in the euro zone.
The European Central Bank is widely expected to lift rates sharply when it meets on Thursday. A US Federal Reserve meeting will follow on Sept. 21.
Weak economic data from China has also added to demand woes, as China’s stringent zero-COVID policy has kept cities such as Chengdu under lockdown.
The country’s crude oil imports fell 9.4% in August from a year earlier, customs data showed on Wednesday. (Reporting by Rowena Edwards; Additional reporting by Isabel Kua in Singapore; Editing by Jan Harvey)